Quote Currency

What is a quote currency?

In a currency pair, the quote currency (also called the counter currency) is the second currency listed. The exchange rate tells you how many units of the quote currency are required to buy one unit of the base (first) currency. For example, in GBP/USD, GBP is the base and USD is the quote currency; the quoted number shows how many U.S. dollars are needed to purchase one British pound.

Key takeaways

• The quote currency is the second currency in a currency pair and is used to express the value of the base currency.
• A currency quote shows how many units of the quote currency are needed for one unit of the base currency.
• Exchange rates are driven by supply and demand and influenced by interest rates, economic data, monetary policy, and geopolitical events.
• The foreign exchange (FX) market is an over‑the‑counter market that operates around the clock across global financial centers.

How to read a currency quote

A currency pair is written as BASE/QUOTE. The quoted number is the price of one unit of the base currency expressed in units of the quote currency.

Example: GBP/USD = 1.4103
This means 1 GBP = 1.4103 USD. To buy GBP, you must sell USD at that rate.

Note on terminology: “Direct” and “indirect” quote conventions vary by country. Commonly, a direct quote shows the domestic currency price of one unit of a foreign currency (e.g., USD per EUR for a U.S. trader), while an indirect quote shows the foreign currency price of one unit of domestic currency.

Example calculation

A trader wants to buy £400 using U.S. dollars and the GBP/USD rate is 1.4103.

Calculation:
400 GBP × 1.4103 USD/GBP = 564.12 USD

So the trader must sell $564.12 (quote currency) to obtain £400 (base currency).

Cross rates

A cross rate is an exchange rate between two currencies that does not involve converting to a common reserve currency (often the U.S. dollar). Cross rates can be derived by combining two quoted rates.

Example:
If EUR/USD = 1.10 and USD/JPY = 110.00, then
EUR/JPY ≈ 1.10 × 110.00 = 121.00

Cross rates let traders convert directly between two non‑domestic currencies without an intermediate conversion to the USD.

Common currency pairs

Major and frequently traded pairs include:
* EUR/USD
USD/JPY
GBP/USD
AUD/USD
USD/CAD
USD/CHF
NZD/USD
Other popular crosses include EUR/JPY and EUR/GBP. In any pair, the first currency is the base and the second is the quote.

What affects the quote currency’s value?

Factors that influence exchange rates include:
* Interest rate differentials and monetary policy
Economic indicators and growth prospects
Trade balances and capital flows
Political and geopolitical events
Market sentiment and speculation

Most spot FX trading is driven by these factors and reflects real‑time supply and demand.

Market structure and regulation

The FX market is primarily an over‑the‑counter (OTC) market operating 24 hours a day across different time zones. In the United States, domestic regulation and oversight of currency trading activities fall under agencies such as the Commodities Futures Trading Commission (CFTC), among others.

Conclusion

The quote currency is the second currency in a currency pair and indicates how much of that currency is needed to purchase one unit of the base currency. Understanding how to read currency pairs, compute conversions, and recognize what drives exchange rates is essential for trading and interpreting foreign exchange prices.